BetterLawNotes-5 (2)

CONTRACT LAW

It is important to recognise that C has a claim in debt for the £20,000 agreed price for the portrait of X, rather than a claim for damages. This is important because the duty to mitigate does not arise with a claim in debt. As such, whether or not C acted reasonably in refusing D’s offer of £5,000 is irrelevant. The claim arises in debt because the right to £20,000 has accrued before the contract is terminated: in other words, the £20,000 represents a sum owing under the contract: C’s primary right to the sum is not discharged on termination and converted into a secondary right to damages. Whether or not D can afford to pay the agreed price is irrelevant: C has an accrued contractual right to that sum actionable in debt.

C does have a claim for damages for D’s refusal to allow him to complete the portraits of Y and Z. In principle, the purpose of damages is to place C in the same position as if the contract had been performed, ie the profit he would have made had he completed and delivered the two portraits. While the £40,000 combined price represents a starting point for C’s claim, he C will have to give credit for the savings he makes by not having to complete the portraits, eg savings on unused materials and savings on travel costs to and from D’s house.

C will not have a claim for the lost opportunity of making a profit on a portrait of B. This is because of the so-called minimum performance rule (Lavarack v Woods). Broadly, damages are assessed on the basis that D would have performed the contract in the way least burdensome to herself. Since she had the right but not the obligation (ie she had an option) to require C to paint a portrait of B, it will be assumed that she would not have exercised the option.

On the other hand, D may be able to recover damages for D’s failure to enter the portraits (all three, not just that of X) into the competition. Presumably, C will be unable to show that he would have won the prize. As such, he can only claim damages for the loss of chance of winning. If he had a more than purely speculative chance, he can recover substantial damages (Chaplin v Hicks).

In addition to claiming for the price of the portrait of X, and damages for loss of profit on the other two portraits and, possibly, for the lost chance of winning the prize, C can in principle also claim damages for expenditure incurred as a result of the breach. Here, it seems that D’s breach was an effective cause of C’s stay in the clinic (Quinn v Burch Bros). However, the £70,000 health clinic bill is likely to be seen as too remote. Under the rule in Hadley v Baxendale, D is only liable for a loss if that type of loss can fairly and reasonably be considered as arising naturally from the breach or can reasonably be supposed to have been in the reasonable contemplation of the parties as the probable result of the breach. Such a consequence does not arise in the usual course of things when the client breaches a contract for the painting of a portrait. Nor is there anything to suggest that D would have contemplated such an outcome at the time she entered into the contract with C.

Finally, and assuming that C’s complaint of severe depression and anxiety is genuine, it is unlikely that C can recover for this non-pecuniary loss. Generally, damages are not recoverable for the manner in which a contract is breached or for the frustration resulting from the fact of the breach: Addis v Gramophone. While damages for distress and disappointment resulting from a failure to provide a contractual benefit may in principle be recoverable, this only applies where an important object of the contract was to provide pleasure or peace of mind etc: Ruxley v Forsyth, Farley v Skinner. It seems unlikely that an important part of the contract here was to provide pleasure or peace of mind to C.

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